OMG, What Have We Done!

Disregard the 100+ point rallies, forget the 5.7% GDP reading for 4Q09, we are heading for a double dip.  I’m not smart enough to know how bad its going to be, but its coming!  And beyond 2010 or even 2015, I’m scared, I’m really scared.  The fiscal morass that we are in right now, with no REAL possible end in sight, is frightening to say the least, it is the beginning of the end for this great country as we will go the way of other former great powers, Rome, Britain…all undone by crushing debt and fiat money.

The article today in the WSJ “White House Proposes $3.8 Trillion Budget”. gives us just a glimpse into how deep the rabbit hole could get.  As our Debt/GDP ratio heads towards 80%, Kenneth Rogoff, of Harvard University sums it up nicely, “that level could push the U.S. toward a tipping point where interest rates could soar, the value of the dollar could plunge and the economy could face another crisis.”

Here is why I believe there will be a double-dip recession in the near term:

1. No answer to 20% real un- and underemployment.  Is this structural, meaning may we never need most of those workers again?!

2. No REAL or NATURAL demand for big ticket purchases such as homes and vehicles.  After incentives and rebates went away, so did the buyers.

3. Yes, GDP went up by 5.7% 4Q09, but this commentary by Kevin Hasset, “Double Dip Risk Rises After Inventory Blowout,” takes the sheen off of that shiny number.  I think we could be on our way to another inventory buildup in the coming months as consumers are wary about discretionary purchases as job prospects remain dim and those who have jobs are worried about losing them.  This will result in firesale prices for excess inventory, compressed earnings, pressure to cut costs, more potential layoffs…you get the picture.

4. Bank’s commercial real estate portfolios, which I feel, many of them have not come to Jesus with their positions.  I don’t know if they are waiting for a miracle recovery to happen or that the regulators are saying to hang on in fear of mass financial catastrophe.

Here is why I’m absolutely scared about the future:

1. In my lifetime, as an educated, middle-upper income earner…I’m expecting to pay taxes of at least 50-60% by the end of my career to service the uncontrollable debt this nation is in.  We will all be in affect, working for the government to pay for this nations debt, 44% owned by two countries, China and Japan…that is scary!  I take that back, we will be working for China in the coming years to pay them back!

2. Inflation is going to be astronomical, what will my dollar be worth 10 years from now, 15, 20!?

3. In my Economics 101 classes, I recall the phenomenon of the “Crowding out Affect”, that is any reduction in private consumption or investment that occurs because of an increase in government spending. If the increase in government spending is financed by a tax increase, the tax increase would tend to reduce private consumption. If instead the increase in government spending is not accompanied by a tax increase, government borrowing to finance the increased government spending would increase interest rates, leading to a reduction in private investment. There may be some real economist that disagree with my statement or this theory, but with our fiscal situation spiraling out of control, would the situation retard any and all potential, sustainable growth in the private sector?!  We are going to be hit with both higher taxes and higher debt!!

I’m sure there are more compelling arguments that I missed, but no sense in piling on.  We can’t blame Obama for this, we can’t blame George W. Bush or the many other presidents before them, this crisis has been building for decades.  I’m just not sure if there is any way we can get out.

2009, Good Riddance!

To put it quite simply…2009 sucked!  I’m sure it sucked equally, if not worse, for millions of others.  After a forced departure from my cushy bank job exactly 1 year ago, I’ve had a lot of time to experiment, to think about what I wanted to be “when I grow up!”  During this time I’ve had a lot of experiences, mistakes and failures.  But alas, I’ve learned from those experiences, mistakes and failures.  For the person that coined the term (and I’m sure my Grandpa will take credit for it), “that which does not kill us, makes us a stronger person,” and I am living proof!

So 2009 was not a banner year for me on an economic scale…but I’ve learned some life lessons and a bit about myself as well.

- Humbleness.  I realize that I am a “very confident person”,  I’ve even been called arrogant.  This may be because I realized a good bit of success early in my career, maybe it was because my mother told me I could do ANYTHING, and to not let other people tell me otherwise.  Regardless, I’m still a positive, confident person, but my edge has definitely dulled.  I’ve been humbled by life…life is a funny thing, its difficult, its challenging, but you must not take it for granted.

- I really give it to the TRUE entrepreneur!  You really have to have chutzpah!  I mean really, how do the serial entrepreneurs sleep!  I don’t know how many nights I’ve laid in bed and thought to myself…”shit, what will happen if I fail!”  I’ve been doing the entrepreneur thing for several months now…and it really is harder than it looks!  I’ve tried it and I failed, but that’s ok…at least I can look back and say “I took it for a spin and its really not quite for me, but I’ve grown because of it.”  Some may argue I did not give it enough time, but time is measured by how much money you have in your bank account.

- Having fun in life is underrated!  Yes there is common recognition that a work/life balance is a must, but how many of us actually live by that mantra?!  Unfortunately, I’ve done way too much working and worrying about how I’m going to pay the bills.  This year, I’ve felt that I’ve not enjoyed life to its fullest, I have not had the time to truly enjoy the simpler things about it.  I’ve always said, “be happy, enjoy life because you never know, one day you may be gone.”

- Family is #1.  My family has been so supportive regarding everything I’ve done this year, and despite my failures, despite my obvious stress, they have still been supportive and believe that I am the GREATEST MAN/DAD ALIVE.  Family support like that truly makes a difference during difficult times and I truly thank them for that….they are the GREATEST FAMILY ALIVE!

During the season of belief, hope and new beginnings…I believe 2010 will bring hope to not only my family, but to other families across the United States that have experienced some of the challenges that my family and I have.  We are in a new world now…I think we all pretty much realize that.  We have to adapt, we have to become stronger, we must realize that the things that truly are important are not parked in our garages or sit in our bank accounts.  I’ve finally realized that (and that’s maybe because I don’t have much left in the latter) and I hope I can become a better, stronger person for that.

So with that said, there is exactly 4 weeks until I can say GOOD RIDDANCE 2009!!  May 2010 be much brighter!

Biking Nerd

So I’ve pretty much transitioned from my urban life (working and living in Denver) to a suburban life in Greenwood Village…hey its for the kids!  One habit that I refuse to give up is riding my cruiser (bike) as much as possible….to work, meetings pretty much everything.  So as I ride my bike through the car-centric burbs I am noticing something.  I’m getting a lot of waves, smiles thumbs up etc. from folks driving in their cars.  I think those drivers are approving of my mode of transportation, but more importantly, I hope they see me and say…”you know what, I think I’m going to ride my bike to work too!”

Fundamental Shiftist

Fundamental Shiftist….hmm?  To go along with the MANY changes that are going in the world (and all of them are not financial), many people are changing their views on life in general and how we individually live them.  We are experiencing fundament shifts in how we earn, save and interact with one another, humans may be going through another evolution of sorts.  Thomas Friedman’s article reflects this point. We must continue to live, but living differently is not an option…it is something we must do!

Great Opinion Piece

I’m kind of going back on my promise to myself not to post any negative articles, comments etc., but this is a damn good OP Ed by Peggy Noonan of the WSJ.

Yes I agree…people do “feel” different than they did just a couple of years ago.

Going Solar with a Power Purchase Agreement

 

So everyone is asking “how do I go solar”…at home and at work. Up until now, solar power has, for the most part, been a pretty big investment. This is where Power Purchase Agreements, or PPA’s come in to play, specifically for commercial users. For those of you who don’t know what a PPA is here is the Wiki.  Solar Power Partners, based out of Mill Valley, CA, is one of the largest players in the market.

So I’ve done some quick math… Colorado commercial users are charged a rate of $0.085/kWh.  Let’s assume post tax credits and rebates, your charged rate will be $0.145/kWh.  Typical with most PPA agreements, there are annual escaltors…the average is about 4.5% per annum.  The average annual electricty rate increase over the past 10 years in Colorado has been about 9.0%.  When the global economy does come back…and the big question is “when”, energy rates will continue to climb exponentially across the world as global consumption of energy and demand will continue its upward ascent as China and India continue on their paths towards First World status.  I’m thinking annual elecricity rate increases will average 10%-15%.

Breakeven happens at year 12…all in after 20 years….you will pay $0.001/kWh by entering into a PPA….negligible!

Endangered Species: The Working Stiff?

 

 

 

 

 

The Working Stiff….(Homo Workus Stiffus!)  Ha!  They are the species that are hilariously depicted on shows such as The Office…or comic strips such as Dilbert.  These are the people that pretty much HATE their jobs.  They show up everyday because they have to.  They have mortgages, credit cards and college tuitions to pay…it is their prison sentence.  

But what happens if there is no work for the Homo Workus  Stiffus?  The concept of stable, safe, salaried employment with health benefits and a company matching 401(k) is becoming very rare these days.  Will Homo Workus Stiffus evolve into…Homo Entrepreneurus?

Giving Up on the Dream of Retirement

“Save your money for retirement.” This is what you are taught by your parents and be the cadre of financial experts on CNBC , the Wall Street Journal and the multitude of financial talking heads and market bulls. So, when you graduate from college and get that first real job, you put away that initial monthly contribution…you feel that you have just started your journey to financial freedom one day.

The concept of retirement was a 20th century luxury.  With 401(k)s and IRAs being destroyed, the greatest Ponzi Scheme of them all, Social Security will be gone in a decade and with pension funds seriously underwater…we will be forced to be door greeters at WalMart and eat cat food until we die unless we force fundamental changes in our lives…in the way we spend, in the way we save and in the way we invest our money.

We need to emphasize investing money in OURSELVES.  I guess the best way to do that is to drive the creation of small businesses, encourage more entrepreneurs.  Yes, entrepreneurial ventures are traditionally very risky…but at least we have more control over our fates…we have no one to blame but ourselves if we fail…and we can bask in the glory at our successes.

Maybe I should have put money money towards that car wash business with my first paycheck!

Just Nationalize Already!

Just nationalize the US banking system already. With reports of the “Good Bank”, “Bad Bank” concept falling apart due to asset pricing issues, instead of beating our heads against the wall to figure it out…just nationalize. It is a much easier solution to this mess.

I know that our banking system is a symbol of our capitalist system…but obviously our form of capitalism has exceeded its useful life…it is time to change…it is time to reform.

Make the banking industry a utility…pay the top execs no more than $400k a year…it will stop the speculation and lessen the global economy’s exposure to cataclysmic events that we are going through right now!

In the past, being a banker was a path to riches…our best and brightest went to the likes of Lehman Brothers, Goldman Sachs and Morgan Stanley. If we change our system now…our best and brightest will now become engineers or eco-prenuers…something that will actually be beneficial and useful to our society as opposed to dreaming up shit to enrich a few and screw everyone else!

Front Page Disaster

If you’ve opened the front page of the WSJ online today you will see…”Breaking News, ConocoPhillips cuts 4% of workforce”, let’s see that equates to roughly 1,600 jobs. Circuit City will be liquidating…that equates to 30,000 jobs. Pfizer…who says pharma is safe?! There goes 2,400 jobs. And finally AMD…1,100 jobs…gone!

Final tally over 35,000 jobs. Let’s do some very rudimentary math here. Let’s make some assumptions…let’s assume that the average income for these 35,000 positions is $40,000…that is $1,400,000,000 of lost income!! I had to run that calculation twice because it was so large! A $1.4 bn impact on our economy in one day’s headlines!

This has happened day after day for the past year and will continue to happen for most, if not all of 2009. Scary!